Shell swings to massive FY loss, raises first quarter dividend
Royal Dutch Shell reported its worst performance in two decades, posting a massive annual loss as the Covid pandemic hammered energy consumption, although it signalled a rise in the first quarter dividend.
On a current cost of supplies (CCS) basis, used as gauge of net earnings, the oil giant on Thursday swung to an annual $19.9bn loss from a $15.2bn profit a year earlier, due to weak liquefied natural gas prices, lower production and weak refining margins.
Fourth-quarter adjusted earnings fell 87% to a worse-than-expected $393m year on year, with analysts looking for $597m. The oil industry has been battered by a combination of oversupply and a plunge in demand as the coronavirus grounds airline fleets and people use their cars less during lockdowns.
Shell's global network of more than 40,000 filling stations helped to mitigate the impact of the second wave of Covid-19.
Full-year adjusted earnings, which exclude asset write downs, plunged 71% to $4.8bn year on year. Shell was last summer forced to slash the value of future oil assets by $17.5bn as prices collapsed during the crisis.
The figures come after rival BP reported the biggest losses in its history on Tuesday, when plunging oil prices and demand led to a $18.1bn loss.
Debt in the final quarter rose to $75.4bn from $73.4bn at the end of the previous three months, pushing gearing to 32.2% against its long-term target of 25%.
However, as oil prices hit a one-year high, the company signalled confidence in future earnings, by announcing it would lift its first quarter dividend by 4% to 17.35 cents a share. The total 2020 dividend fell 65% to 65 cents a share after a cut in payouts for the first time since 1945.
Shell was cautious on its 2021 outlook against the backdrop of the Covid-19 pandemic, citing "significant uncertainty" in macroeconomic conditions "with an expected negative impact on demand for oil, gas and related products”.
Interactive investor analyst Richard Hunter said that even without oil price volatility, Shell had to face the longer term challenge and cost of its strategy to move to greener output.
"The company’s size and experience in the resource world generally will give it more than a fighting chance, even though the immediate path ahead may be rocky. Even so, Shell remains a company which is a favourite among investing die-hards, and the market consensus has recently regained its traditional status as a 'buy',” he said.